Question

1. Both your real wage and your nominal wage fell, which of the following must be...

1. Both your real wage and your nominal wage fell, which of the following must be true.

a.         Inflation is positive but less than the rate of increase in your wage.

b.         Deflation has occurred.

c.         your boss took some of your wages illegally.

d.         The overall price level has fallen more than your nominal wage.

e.         None of the above.

2. The invention of new technology has increased ________ unemployment.

a.         structural                     d.         frictional

b.         cyclical                        e.         seasonal

c.         discouraged

3. When actual unemployment is higher than its natural rate

a.         the economy is producing above its long-run capabilities.

b.         the economy is producing at its long-run capabilities.

c.         resources are employed at levels that are not sustainable in the long run.

d.         output is lower than full-employment output.

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Answer #1

Q1) The answer is (e) none of the above

Real wage = nominal wage - inflation

Thus, if nominal wage if falling, the real wage will fall even without any changes in the price level.

Thus, all other options are incorrect inflation or deflation doe snot have to be the case necessarily.

Q2) The answer is (a) structural

technological change causes structural unemployment as it creates a mismatch of skills as a lot of the earlier skills now become obsolete.

all other options are incorrect as they are not the type of unemployment created by technology

Q3) the answer is (d) output is lower than full-employment output

Actual unemployment is at the natural unemployment level when the economy is producing at the potential. If the output is below it, there will be mor eunemployment than natural.

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